How to protect your credit in the COVID-19 crisis

6 tips to keep a good credit score in a crisis

05/19/2020

Kathryn Parkman

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If you’re freaking out about your credit score right now, you aren’t alone. About half of American consumers worry that the financial crisis caused by the COVID-19 pandemic will negatively impact their credit scores, according to a recent survey conducted via The Harris Poll.

It’s stressful enough planning a future during heightened economic uncertainty even if you have great credit. If you have a less-than-good credit score, it feels impossible — bad credit makes your insurance and loans more expensive and limits career and housing opportunities.

During this time, ConsumerAffairs recommends staying informed, considering all your options and being extra vigilant about protecting yourself from identity theft. Below, read more tips for ways to help keep your credit score safe.

1. Routinely check your credit reports for inaccuracies

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We recommend checking all 3 credit bureaus each month. Through April 2021, Experian, TransUnion and Equifax will provide all U.S. consumers free weekly credit reports through AnnualCreditReport.com. If you see inaccurate charges or fraudulent accounts on your credit report, you have a right to dispute it. To learn more about how to fix a damaged credit history, read our credit repair guide.

Finding unfamiliar information on your reports is one of the most significant indicators of identity theft. Identity thieves wreck their victims’ credit scores by opening up credit cards and maxing them out. For more information, read about cybersecurity and COVID-19 and how to check for identity theft.

You can also pay for identity theft protection services that monitor your credit reports and personally identifiable information (PII) across the internet and dark markets. Right now, our partners at Identity Guard are offering Consumer Affairs readers up to a 33% discount on their identity theft protection services.

2. Be smart about online shopping

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Even if your state is reopening, online shopping may be the best option for you to avoid unnecessary crowds. Still, with every online transaction comes the risk of identity theft.

Trust your gut — if an online deal or “special offer” seems too good to be true, it probably is. For instance, a scammer advertised "free" face masks on social media if you paid shipping and handling charges — when consumers didn't receive their masks and went back to check the website, it was gone. Here are some more online shopping safety tips to follow when you make online purchases:

Be skeptical of online stores without any public reviews or social media presence.

Check if the website starts with “https://”, which stands for “Hypertext Transfer Protocol Secure” and confirms the site was designed with cybersecurity in mind.

Never save your payment information directly to a website. Instead, take advantage of third-party payment programs like ApplePay, PayPal and GooglePay.

If you suspect your personally identifiable information (PII) is compromised, you should freeze your credit, which blocks anyone from accessing your credit reports. You should then report instances of consumer fraud of identity theft to the Federal Trade Commission (FTC).

“To protect your credit score, the single most important step you can take is to put a security freeze on your credit files at the 3 major credit bureaus, Experian, TransUnion and Equifax,” according to Rob Douglas, ConsumerAffairs identity theft protection contributing editor. “You can place a security credit freeze at all 3 credit bureaus at no cost, and it will prevent someone from opening a new credit line in your good name.”

3. Be proactive with lenders and creditors

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Even in uncertain times, some things remain constant. The most influential factor that affects your credit scores is still your payment history. Partial payments are better than nothing when it comes to your credit score. A series of missed payments on your report has a long-term negative effect.

“It's so important to do everything you can to protect your credit during difficult times. Of course, you should pay your bills on time,” said Barbara A. Friedberg, a personal finance expert and owner of Robo-Advisor Pros. “But if you're having financial difficulties, make sure to contact your creditors and ask for a payment plan. That way, you won't be penalized for delaying or minimizing payments on your obligations. You'll find many businesses receptive to making adjustments in your bills during this difficult period."

Credit reporting bureaus are most interested in whether you pay back loans and credit cards. (According to The Harris Poll survey, 81% of Americans incorrectly think that rent payment history impacts credit scores.)

If you can’t make a full payment, taking care of the minimum amount prevents a significant blow to your credit score.

Instead of quietly missing a credit card payment, reach out to your issuer and request assistance. It never hurts to ask if you can defer or reduce payments.

If you have automated payments for a loan scheduled through your checking account that you can’t pay, ask if your lender can work with you before they withdraw the amount from your account. Don’t wait until the payment is past due, or your account is already overdrawn.

Many utility, mobile and internet providers offer reasonable payment arrangements if you ask.

More than 46 million Americans expect to miss a credit card payment this year. Fortunately, the Federal Deposit Insurance Corporation (FDIC) encourages financial institutions to help consumers cope with the financial crisis resulting from the coronavirus pandemic. Many companies are temporarily suspending payments and cancellations during the outbreak. For example, automakers are extending warranties. Nonprofit agencies are also providing credit counseling.

4. Add a consumer statement to your credit history

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Under the Fair Credit Reporting Act (FCRA), you can write a short statement (up to 100 words) visible to anyone who looks at your credit report. The statement won’t affect your credit score one way or the other, but it gives you a chance to explain any defensible circumstances to potential future lenders.

For example, you could write, “I can’t make this payment right now because I lost my job due to the coronavirus pandemic.” You can also add a statement if you disagree with the results of a credit dispute. Be aware that consumer statements stay on your credit report for 10 years, so avoid including anything that could potentially portray you as a risky borrower.

You can also request that lenders indicate on your credit report that you were “affected by a natural or declared disaster.” For more information on how to submit a consumer statement, visit the credit reporting bureaus at Experian.com, Equifax.com and TransUnion.com.

“While providing assistance to those in need and encouraging all of us to follow stay-at-home orders and guidelines issued by most states and the federal government, these programs are an attractive target to identity thieves and other financial fraud criminals. If an identity thief files for benefits in your name, or changes the address and/or bank account information on an existing benefits account, you may suffer financial harm and, potentially, harm to your credit score,” Douglas said.

In addition to providing emergency relief benefits, the CARES Act also regulates how companies share information with the credit reporting bureaus. Your creditor is not required to report skipped or partial payments to the credit bureaus if you make other arrangements, according to the Consumer Financial Protection Bureau (CFPB).

Find more information, read these resources about government benefits during the coronavirus pandemic. Visit coronavirus.gov for live updates.

6. Rethink your budget and plan ahead

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You already know you can save money by cutting back on nonessential retail therapy and meal delivery services. Reducing costs doesn’t directly impact your credit score but can factor into your credit card usage, amount of debt and credit utilization ratio, which are significant determiners of credit scores.

Here are a few ways you can save more and spend less for those in crisis mode because of a layoff or loss of income:

Cut back: Set aside 15 minutes sometime today to cancel any recurring monthly fees that you don’t use right now, including streaming services and gym memberships. For example, if your new schedule lets you do your own lawn care, you can save on that too.

Pay attention: Use a financial management app to track how much you’re spending, when bills are due and where you can save. Plus, many of these apps offer basic credit monitoring services as a bonus.

Transfer debt: If you’re furloughed and expect to be back at work within the next year, you can transfer your credit card debt to a low-interest card and save on monthly payments in the meantime. For more information, read how a balance transfer credit card can help you pay down credit card debt faster.

Bottom line: Protecting your credit score in 2020 and beyond

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As the financial crisis caused by the coronavirus pandemic rebounds, try to remember that serenity is essential to any recovery process. You must accept the things that you cannot change, have the courage to change the things you can and the wisdom to know the difference.

Don’t forget that all credit scores are constantly in flux. Anyone’s score can plummet after just a few months of missed payments with high credit utilization. Even if yours takes a hit this year, you can build it up to where it was. After all, a credit score exists so potential creditors can make a decision based on your past creditworthiness.

It’s also important to remember that it might not make sense to prioritize credit scores right now for a lot of people. If you’re in a tough situation, focus on yourself first.